Out How: The Economics of Ending Wars

Michael D. Intriligator

Ten points of Michael D. Intriligator, professor of economics, political science and public policy, UCLA, and vice chair of Economists for Peace and Security:

1. On the economics of ending wars, the decision to prolong a war or to terminate it in various possible ways can be studied using the economic tools of cost-benefit analysis and expected utility theory. One of the belligerents, such as the U.S. currently in Iraq (and also in Afghanistan) will continue the war if it sees the potential future benefits exceeding the costs, where each is weighted by its probability of occurrence and future benefits and costs discounted to the present. On the costs of the Iraq War, the most detailed study was done by Joseph Stiglitz and Linda Bilmes, presented at the 2006 ASSA meetings and published in the Los Angeles Times. They recently updated their study, which they published as “Encore: Iraq Hemorrhage, Update of “The Economic Costs of the Iraq War,” in The Milken Institute Review, Fourth Quarter, 2006, pp. 76-83. They estimated the total price tag for the war as $2.267 trillion, a stunning figure. Future costs will probably continue at more or less the same rate, depending on whether the U.S. changes its strategy by, for example, a surge in troops committed to the war.

As to the benefits, one must consider the real reasons for the Iraq war, in contrast to the reasons given by Bush and others that were excuses, rationales, or simply wrong. The ostensible reasons given by Bush were 1) Iraqi possession of WMD, 2) to fight terrorism, 3) retaliation for 9/11, and 4) building a democracy in the Middle East that would spread throughout the region. The real reasons, however, were: 1) retaliation for Saddam’s attempted assassination of President Bush’s father, 2) desire for U.S. bases and influence in the region, 3) protection of Israel. In my view, retaliation was the main motivation for President Bush while U.S. bases and influence and protection of Israel were the motivations for the “neocons” in the Project for a New American Century (PNAC), Century (PNAC), many of whom became important players in the Bush Administration, occupying many high offices. They were able to use Bush’s powerful personal grievance against Saddam in 1) to convince him to invade and occupy Iraq, as they had been planning for many years when they were out of office, during the preceding Clinton Administration, when they planned the operation as part of PNAC. In fact this plan came up in the very first meeting of President Bush’s Cabinet, to the surprise of some who had not been members of PNAC. None of these neocons had direct personal military experience and thus they were all “armchair generals.” They also had no deep knowledge of Iraq or the region as a whole and did not consult with people in the State Department and CIA who did know the country and region. The neocons had no appreciation for a culture that they did not understand and they had no opposition in the White House or Pentagon. Many people have alleged oil was the real reason for the invasion, but, as I see it, this was only a secondary reason for the neocons as well as for President Bush.

Of course, it is hard to quantify the value of these benefits based on the motivations for the war, and some were achieved, including the overthrow of Saddam and his execution as well as the establishment of U.S. bases in Iraq. No WMD were found, and as to the fight against terrorism, Iraq has become a training base for terrorists, which it never was under Saddam, and these terrorists are now much closer to Israel. It is hard or impossible to justify the continuation of the war based on these past and potential future costs and benefits.

2. Historically, most wars end when one of the belligerents is defeated, as in World Wars I and II or the Vietnam War, but some lead to a stalemate or a truce, as in the Korean War and the Iran-Iraq War. In others, one of the belligerents withdraws, as in the Soviet invasion of Afghanistan. The current Iraq War may, in fact, follow the pattern of the Soviet invasion of Afghanistan, involving the invasion of a poor and powerless Muslim nation, a neighboring country to Iraq, by a superpower. After many deaths on both sides, the Soviet superpower eventually withdrew without making any gains and left a civil war in its wake. The Soviet Union invaded in December 1979 and withdrew 10 years later, in 1989. If the current Iraq War follows the same course then the U.S. will withdraw in March 2013, ten years after the 2003 invasion without making any gains and leaving a civil war behind. Of course, 10 years for the Soviet Union in Afghanistan does not automatically imply 10 years for the U.S. in Iraq, but this war could drag on much longer than anyone is now considering. Recall that in the Vietnam War large numbers of American combat troops began to arrive in 1965 and the last left the country in 1973, with the war finally concluded on 30 April 1975, with the fall of Saigon to North Vietnamese forces. Thus the U.S. involvement also lasted some 10 years, just as in the case of the Soviet war in Afghanistan.

3. The Harvard philosopher George Santayana stated in a book published in 1905 “Those who cannot remember the past are condemned to repeat it.” Life of Reason, Reason in Common Sense, Scribner’s, 1905, p. 284, and this seems to be applying to the Middle East, such the U.S. establishing a puppet government in Iraq much as the British did in the 1920’s modeled upon their own government with a disastrous outcome. We are repeating the British experience in Iraq. They set up a mini British constitutional monarchy with a young King Faisal on the throne. After Britain granted Iraq independence in 1932 the country fell into a period of strife. A military strong man overthrew the monarchy in 1958, and Saddam Hussein eventually deposed him. This may be the most likely future course of Iraq, not a democracy or civil war or partition or a continued U.S. presence, but rather an eventual takeover by a strong man, the leader of one of the militias, perhaps Moktada al-Sadr, who is the strongest militia leader today and has credibility based in part on the legacy of his father and family. There are earlier historical precedents as well.

4. A point I have been making in recent talks builds on one of the recommendations of the recent Baker-Hamilton Iraq Study Group report, which advocated negotiations with Iran and Syria. Many others have been suggesting the use of diplomacy such as these negotiations for some time, including me. What these proposals omit is the agenda for such negotiations. My proposal would be a “Grand Bargain” under which Iran, is very influential in Iraq, could help us exit gracefully from Iraq, while the U.S. in return as a quid pro quo could make a deal with Iran similar to the one that we made with India. Under it we would help them with nuclear technology for energy production and other peaceful purposes but they would have to continue as a non-weapons state member of the NPT and sign on to the Additional Protocol of the IAEA, involving full-scope IAEA safeguards of their nuclear facilities, which would help guarantee that they develop only nuclear energy, as Iranian President Mahmud Ahmedinejad has stated is their avowed goal, and not nuclear weapons. Whether such a “Grand Bargain” will emerge or not it is important for other nations, particularly those in the region to see that we are willing to talk with Iran and Syria. (For a related proposal see Abbas Maleki and Matthew Bunn. “Finding Compromise in Iran.” The Boston Globe, 15 June 2006).

As to negotiations in general, the U.S. has largely avoided them in recent years other than negotiations with friends and allies. Vice President Dick Cheney has refused to negotiate with Iran, Syria, Hamas, Hizbullah, etc. saying, “We do not talk to evil.” During the Cold War as well as earlier and later we regularly negotiated with our ostensible enemies, including the Soviet Union, even when President Reagan had denounced it as an “evil empire.” We even negotiated with China at the time when we did not have diplomatic relations with the PRC, through our ambassadors in Warsaw. In the current Bush Administration we have replaced negotiations with enemies by unilateral demands, ultimatums, economic and political sanctions, and ultimately military invasion and occupation, as in Afghanistan and Iraq. There can be value, however, in negotiations with Iran, Syria, and other states. There would also be value to direct negotiations with North Korea to resolve issues on the Korean peninsula and finally put an end to the Korean War after more than 50 years of a truce. Survival, security and independence are paramount issues to the DPRK and also to Iran, especially after President Bush’s “Axis of Evil” speech of the Union address and the subsequent invasion of Iraq, leaving only these two nations untouched so far.

5. There was a theory of falling dominos during the Cold War that we used to justify our interventions in Southeast Asia and Central America, but, as it turned out, this theory did not apply. Rather, the falling dominos were seen in the collapse of the Soviet Bloc starting in 1989 and ending in 1991 with the collapse of the Soviet Union, so the dominos fell in a different direction than what we feared and in a different place. President Bush was also counting on a theory of falling dominos in the Middle East, with the transformation of Iraq into a democracy leading other nations in the region to become democracies, but as things developed the falling dominos have been going in another direction: from chaos and civil war in Iraq to the same developing in other nations in the region, including Lebanon and possibly others. Of course, things often work out in ways that are very different than what we expect.

In an interview in the New York Times of Dec. 22, 2006 Secretary of State Rice said of the Iraq War, ”I don’t think it’s a matter of money. Along the way there have been plenty of markers that show that this is a country that is worth the investment, because once it emerges as a country that is a stabilizing factor you will have a very different kind of Middle East.” If the reverse falling dominos theory applies, however, once Iraq emerges as a country that is a destabilizing factor, leading to civil wars in Lebanon, Palestine, and possibly elsewhere we will have a very different kind of Middle East, but one that is much worse than the one that existed prior to March 2003.

6. Bob Woodward’s latest book State of Denial makes the point that President George W. Bush is living in such a state, but one should ask why he is in this state. I believe that President Bush cannot tolerate the thought of possible failure, a situation that goes back to his days in trying to run an oil exploration business that failed when they found no oil and running for Congress but failing to win a seat. When he was asked at a recent press conference what mistake he had made he said that he couldn’t think of any but would get back to the reporter, which he apparently never did. This psychology of President Bush is important in understanding how the current Iraq war will end: he will never admit defeat and thus is likely to try some desperate moves, such as a surge in troops, which is not likely to work, and then wait it out for his successor in January 2009 to take over, presumably to pull out. He can emphasize training the Iraqi military and police but U.S. officers familiar with both the military and police have noted that the problem is not lack of training but rather lack of loyalty. A fundamental problem is that President Bush refuses to lose “face” in the light of his commitments and previous statements. Of course, no U.S. President like to lose a war but some have withdrawn to cut their losses, such as Reagan in Lebanon and Clinton in Somalia.

7. Some have drawn analogies between the Iraq War and the Vietnam War, but there are essential differences between the two. In the case of Vietnam there was a well-established government in North Vietnam ready to take over South Vietnam, which is what ultimately happened. In Iraq, by contrast, there is no “North Iraq” prepared to take over the country, so there is no simple way out of the conflict other than the devastation of the country in an all-out civil war or its takeover by a strong man, each of which is a real possibility today. In addition, the government of South Vietnam was a puppet of the U.S. while in Iraq the government that was initially a puppet of the U.S. has evolved through democratic processes into is a puppet of Iran through the Shia-dominated government, police, and militias. In fact, the Iraq problem is an even bigger one than Vietnam. A lesson from Vietnam was that the domino theory was bogus because the U.S. could withdraw without negative strategic implications, whereas the U.S. faces negative strategic implications if it stays OR withdraws from Iraq.

8. The way out of the Iraq war: Neither: 1) President Bush’s earlier mantra of “stay the course;” nor 2) President Bush’s opponent’s “pull the plug,” or “cut and run;” nor 3) adding more troops and resources to the effort, as some have, suggested, such as a “surge” of troops into Baghdad; nor 4) gradually reduce our commitments there until eventually we will be totally out, as others have suggested; nor 5) additional training of Iraqi troops by U.S. troops, None of these options would work, however, as they all have the common denominator of unilateral U.S. decision-making. I suggest that the best option at this point would be to avoid such unilateralism, which got us into this quagmire in the first place, where we have, in effect, painted ourselves in a corner. Rather we should replace it by multilateralism, talking with the neighboring states, including not only our friends in Turkey, Jordan, and Saudi Arabia but also Syria and Iran. A model might be the multilateral process in Afghanistan that also involved its neighboring states in the Bonn conference and also the 1995 Dayton accords on Bosnia.

9. After the 9/11 attacks on the U.S. President George W. Bush declared a “War on Terror” that was later broadened to a “Global War on Terror (GWOT)” There is no clear enemy in this war as terror is in the mind of the beholder and also that there is no clear end to such a war, as the tactic of terror has existed throughout history. The German philosopher Immanuel Kant wrote the essay “Perpetual Peace” in 1795 in which he considered the possibility of such a peace if states were small and democratic, later analyzed by current political scientists as the theory of “democratic peace.” By contrast, the “Global War on Terror” is one of “Perpetual War” and thus a fundamental threat to global security that must be overcome by global collective action.

10. Following is President George Herbert Walker Bush’s statement on why he did not occupy Baghdad. It’s unfortunate that his son, President George W. Bush did not review this before his own invasion and occupation of Baghdad:

“Trying to eliminate Saddam… would have incurred incalculable human and political costs. Apprehending him was probably impossible…. We would have been forced to occupy Baghdad and, in effect, rule Iraq…. there was no viable “exit strategy” we could see, violating another of our principles. Furthermore, we had been self-consciously trying to set a pattern for handling aggression in the post-Cold War world. Going in and occupying Iraq, thus unilaterally exceeding the United Nations’ mandate, would have destroyed the precedent of international response to aggression that we hoped to establish. Had we gone the invasion route, the United States could conceivably still be an occupying power in a bitterly hostile land.” – George Herbert Walker Bush, from his memoir, A World Transformed (1998)

Originally delivered as a speech on Jan. 5, 2007, at the ASSA Conference’s Economists for Peace and Security Roundtable in Chicago.